The thing about warranties is that you are giving a company money for nothing. At some point in the future, they MIGHT have to pay for repairs to your product, but they've run the numbers and know that statistically, you are less likely to get your money's worth than they are to keep your money.
Even if that wasn't the case, they are able to use your money for as capital, sometimes for years before having to pay out. It's very much like offering insurance with the profit margins being VERY high. From a store point of view, these plans are pure gold.
So imagine the scenario from the perspective of the sales-person. Because of the profits, management pressures salespeople to sell them, but many customers resist (At times, I've had people walk out of the store just because I tried to explain the service plan to them). To be successful, sales-people will keep their pitch short, simple, and focus on the positives.
I'm not necessarily saying that sales-people are dishonest, but they are pressured to meet goals above anything else. This means that you have to take the time and effort to make sure it works as simply as they say it will. As an example, here are some fictitious scenarios where you might not be able to collect:
The details of the service plans were taken from information available on respective company websites as of 3/11/2006
A $59.99 phone at Office Max is offered with a 1 year warranty for $11.99 and a 2 year for $19.99. In their case, your coverage begins after expiration of the manufacturer warranty. Let's assume that something goes wrong in the first year.
Standard warranties often require that you ship the item, so add that amount to your total warranty cost. If the shipping was around $7 dollars, you've now paid $19 for your 1 year plan and $27 for your 2 year plan on your $60 item.
That's still a pretty good deal assuming all goes as planned, but what if it doesn't? Now let's say that the manufacturer, for whatever reason, decides that you're not covered. Since Office Max's coverage doesn't start until after the manufuactuer warranty period has expired, you have the choice to buy a new phone now and cut your losses or wait until the manufacturer warranty expires (which could be many months or even years).
You buy a $854.99 camcorder at Sears. The warranty is five years for $239.99 and starts immediately (not after the manufacturer warranty expires). With the warranty coverage, you get an annual "preventative maintenance check".
Let's say you go to the beach every weekend during the summer. After a few trips, you notice that the camera's buttons are gritty with sand and remember your service plan. You take it in and they send it off for service, but determine that the amount of sand is excessive and void your warranty due to abuse.
You point out that their plan covers "normal wear and tear" and that you didn't use it in any abnormal way, but they don't budge. If you had known this would be a problem ahead of time, you could have vacuumed or shaken out the loose sand before taking it in, but either way, it's too late now. You have few choices but to pursue legal action or try to get a refund of your warranty (minus the recent service costs and time deprecation).
For fun and education, try this trick the next time you go to a store and they offer you a service plan: Open the legal brochure (ask them for one if they haven't handed it to you already) and ask them to summarize each section. Then read the section and see if it matches what they described.
Not only will this make it easier to read, but you'll learn very quickly how much the salesperson knows about what they're trying to sell you.
In the end though, you'll need to know which circumstances make your warranty worth buying and which make it worth skipping (next) or you'll just be throwing your money down the toilet.